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old mutual plc international financial reporting standards ifrs analyst and investor briefing 3 may 2005

Overview Julian Roberts Group Finance Director. Agenda. OverviewJulian RobertsTechnical impactsKatie MurrayClosing remarksJulian RobertsQ

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old mutual plc international financial reporting standards ifrs analyst and investor briefing 3 may 2005

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    1: Old Mutual plc International Financial Reporting Standards (“IFRS”) Analyst and Investor Briefing 3 May 2005

    2: Overview Julian Roberts Group Finance Director

    3: Agenda Overview Julian Roberts Technical impacts Katie Murray Closing remarks Julian Roberts Q&A

    4: Overview Old Mutual supports common global standards We are ready for IFRS Positive impact on adjusted operating profit while overall equity position remains broadly unchanged We will continue to use return on equity and embedded value as the primary performance measures of the business Presentation of financial statements will change significantly Information will continue to be shown on a smoothed and unsmoothed basis Accounting for BEE is impacted by IFRS 31 December 2004 results presented have been audited

    5: Key Financial Highlights - 2004

    6: Business Performance Indicators – 2004

    7: What is Driving the Change? Key areas impacted by IFRS Insurance Accounting Revenue Recognition Financial Instruments Share-based Payments Goodwill No significant impact Post-Retirement Benefits Consolidation Property Dividends Taxation

    8: Reconciliation of Equity

    9: Reconciliation of Adjusted Operating Profit

    10: Reconciliation of Basic EPS

    11: Technical Impacts Katie Murray Head of IFRS Implementation

    12: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    13: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    14: IFRS 4 Insurance Contracts

    15: IFRS 4 Insurance Contracts Most significant impact is definition of insurance Products not qualifying as insurance (investment contracts) are valued under IAS 39 Insurance products and those with discretionary participating features have minimal changes under IFRS 4 until Phase II of the IASB Insurance Project is completed

    16: Insurance Products Classification – Life

    17: Investment Contract Valuation UK GAAP Liabilities are computed in accordance with local GAAP requirements (FSV for Africa, amortised cost for US)

    18: Investment Contract Valuation

    19: Investment Contract Premiums and Claims UK GAAP Amounts received are recorded as premiums Payments to contract-holders are recorded as claims

    20: Insurance Accounting Changes – Life

    21: Insurance Accounting Changes – Life

    22: Elimination of Equalisation Provisions

    23: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    24: IAS 18 Revenue Recognition UK GAAP Initial and recurring fees are recognised as received Acquisition costs are expensed as incurred (not deferred)

    25: IAS 18 Revenue Recognition

    26: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    27: IAS 32/39 Financial Instruments

    28: Classification and Valuation of Financial Instruments

    29: Classification and Valuation of Financial Instruments

    30: Derivatives and Hedge Accounting

    31: Derivatives and Hedge Accounting

    32: Embedded Derivatives

    33: Embedded Derivatives

    34: Impairment of Loans and Receivables

    35: Impairment of Loans and Receivables

    36: IAS 39 and the EU Carve Out

    37: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    38: IFRS 2 Share-based Payments UK GAAP Costs of awards are recognised over the service period Cost recognised is the difference between the market value of the shares at date of grant and the amount of any consideration the participant is required to pay for the shares – typically nil for options and share price on grant date for restricted share plans (RSPs)

    39: IFRS 2 Share Based Payments

    40: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    41: IFRS 3 Business Combinations – Goodwill

    42: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    43: IAS 27 Consolidation

    44: IAS 27 Consolidation

    45: Other Impacts Property (IAS 16) Property is held at depreciated fair value Post Employment Benefits (IAS 19) Defined contribution schemes: no significant change Recognised full actuarial gains and losses at 1 January 2004 as provided by IFRS 1 exemption Defined benefit schemes: Actuarial gains and losses recognised using “corridor” method Dividends (IAS 10) Dividends proposed but not yet declared at balance sheet date are derecognised as liability and disclosed

    46: IFRS Presentational Issues Income statement Publish a combined income statement with emphasis on segmental information Continue to report a secondary income statement based on long term rate of return Disclosure The volume of disclosure is increased significantly as a result of IAS 32 and IFRS 4 Cash flow statement Changes to format and now includes policyholder fund cash flows UK GAAP to IFRS reconciliation Key reconciliations back to UK GAAP are prepared on first time adoption to assist in the analysis of 2005 reporting under IFRS

    47: Closing Remarks Julian Roberts Group Finance Director

    48: Black Economic Empowerment (BEE) On 19 April 2005, Old Mutual plc announced BEE transactions across all of its South African businesses The transaction announcement documented the consolidated pro-forma financial effects on a UK GAAP basis The key differences between UK GAAP and IFRS is the introduction of IFRS 2 – Share-based Payments which results in an additional charge to the income statement There will be no change to the adjusted EV calculations The economic cost of BEE remains unchanged

    49: BEE – Financial Impact on Earnings

    50: BEE – Financial Impact on EPS

    51: IFRS Impact on Other Financial Measures Solvency / regulatory capital Capital requirements are driven by local regulatory accounting No impact on capital requirements anticipated until local regulatory authorities adopt IFRS Financial Groups Directives (“FGD”) requirements Similarly, FGD continues to be based on local statutory basis and will not be impacted by IFRS until such time as regulators move to incorporate IFRS into statutory returns Dividends IFRS will not impact our dividend paying capacity Embedded Value IFRS has minimal change to our Embedded Value

    52: Communications Timetable

    53: Summary IFRS is embedded into our internal and external reporting process There is no change in the underlying economics of the business We will continue to use embedded value and return on equity as the primary performance measures of the business IFRS will not impact our dividend paying capacity Ongoing we will be influenced by market movements and will seek to minimise volatility Impact on equity, profit and adjusted EPS for 2004 is relatively small and in line with our peers BEE estimated impact on adjusted operating EPS 0.8p

    54: Questions & Answers

    55: Appendix 1 Adjusted operating profit by Business Unit

    56: Adjusted Operating Profit – OMSA

    57: Adjusted Operating Profit – Nedcor

    58: Adjusted Operating Profit – Mutual and Federal

    59: Adjusted Operating Profit – US Life

    60: Adjusted Operating Profit – US Asset Management

    61: Adjusted Operating Profit – All Other Businesses *

    62: Appendix 2 IFRS Analyst and Investor Briefing in SA Rand

    63: Overview Julian Roberts Group Finance Director

    64: Agenda Overview Julian Roberts Technical impacts Katie Murray Closing remarks Julian Roberts Q&A

    65: Overview Old Mutual strongly supports global standards We are ready for IFRS Positive impact on adjusted operating profit while overall equity position remains broadly unchanged We will continue to use return on equity and embedded value as the primary performance measures of the business Presentation of financial statements will change significantly Information will continue to be shown on a smoothed and unsmoothed basis Accounting for BEE is impacted by IFRS 31 December 2004 results presented have been audited

    66: Key Financial Highlights - 2004

    67: Business Performance Indicators – 2004

    68: What is Driving the Change? Key areas impacted by IFRS Insurance Accounting Revenue Recognition Financial Instruments Share-based Payments Goodwill No significant impact Post Retirement Benefits Consolidation Property Dividends Taxation

    69: Reconciliation of Equity

    70: Reconciliation of Adjusted Operating Profit

    71: Reconciliation of Basic EPS

    72: Technical Impacts Katie Murray Head of IFRS Implementation

    73: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    74: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    75: IFRS 4 Insurance Contracts

    76: IFRS 4 Insurance Contracts Most significant impact is definition of insurance Products not qualifying as insurance (investment contracts) are valued under IAS 39 Insurance products and those with discretionary participating features have minimal changes under IFRS 4 until Phase II of the IASB Insurance Project is completed

    77: Insurance Products Classification – Life

    78: Investment Contract Valuation UK GAAP Liabilities are computed in accordance with local GAAP requirements (FSV for Africa, amortised cost for US)

    79: Investment Contract Valuation

    80: Investment Contract Premiums and Claims UK GAAP Amounts received are recorded as premiums Payments to contract-holders are recorded as claims

    81: Insurance Accounting Changes – Life

    82: Insurance Accounting Changes – Life

    83: Elimination of Equalisation Provisions

    84: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    85: IAS 18 Revenue Recognition UK GAAP Initial and recurring fees are recognised as received Acquisition costs are expensed as incurred (not deferred)

    86: IAS 18 Revenue Recognition

    87: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    88: IAS 32/39 Financial Instruments

    89: Classification and Valuation of Financial Instruments

    90: Classification and Valuation of Financial Instruments

    91: Derivatives and Hedge Accounting

    92: Derivatives and Hedge Accounting

    93: Embedded Derivatives

    94: Embedded Derivatives

    95: Impairment of Loans and Receivables

    96: Impairment of Loans and Receivables

    97: IAS 39 and the EU Carve Out

    98: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    99: IFRS 2 Share-based Payments UK GAAP Costs of awards are recognised over the service period Cost recognised is the difference between the market value of the shares at date of grant and the amount of any consideration the participant is required to pay for the shares – typically nil for options and share price on grant date for restricted share plans (RSPs)

    100: IFRS 2 Share Based Payments

    101: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    102: IFRS 3 Business Combinations – Goodwill

    103: Main IFRS Technical Impacts IFRS 4 Insurance Contracts IAS 18 Revenue Recognition IAS 32/39 Financial Instruments IFRS 2 Share-based Payments IFRS 3 Business Combinations – Goodwill IAS 27 Consolidation

    104: IAS 27 Consolidation

    105: IAS 27 Consolidation

    106: Other Impacts Property (IAS 16) Property is held at depreciated fair value Post Employment Benefits (IAS 19) Defined contribution schemes: no significant change Recognised full actuarial gains and losses at 1 January 2004 as provided by IFRS 1 exemption Defined benefit schemes: Actuarial gains and losses recognised using “corridor” method Dividends (IAS 10) Dividends proposed but not yet declared at balance sheet date are derecognised as liability and disclosed

    107: IFRS Presentational Issues Income statement Publish a combined income statement with emphasis on segmental information Continue to report a secondary income statement based on long term rate of return Disclosure The volume of disclosure is increased significantly as a result of IAS 32 and IFRS 4 Cash flow statement Changes to format and now includes policyholder fund cash flows UK GAAP to IFRS reconciliation Key reconciliations back to UK GAAP are prepared on first time adoption to assist in the analysis of 2005 reporting under IFRS

    108: Closing Remarks Julian Roberts Group Finance Director

    109: Black Economic Empowerment (BEE) On 19 April 2005, Old Mutual plc announced BEE transactions across all of its South African businesses The transaction announcement documented the consolidated pro-forma financial effects on a UK GAAP basis The key differences between UK GAAP and IFRS is the introduction of IFRS 2 – Share-based Payments which results in an additional charge to the income statement There will be no change to the adjusted EV calculations The economic cost of BEE remains unchanged

    110: BEE – Financial Impact

    111: BEE – Financial Impact on EPS

    112: IFRS Impact on Other Financial Measures Solvency / regulatory capital Capital requirements are driven by local regulatory accounting No impact on capital requirements anticipated until local regulatory authorities adopt IFRS Financial Groups Directives requirements Similarly, FGD continues to be based on local statutory basis and will not be impacted by IFRS until such time as regulators move to incorporate IFRS into statutory returns Dividends IFRS will not impact our dividend paying capacity Embedded Value IFRS has minimal change to our Embedded Value

    113: Communications Timetable

    114: Summary IFRS is embedded into our internal and external reporting process There is no change in the underlying economics of the business We will continue to use embedded value and return on equity as the primary performance measures of the business IFRS will not impact our dividend paying capacity Ongoing we will be influenced by market movements and will seek to minimise volatility Impact on equity, profit and adjusted EPS for 2004 is relatively small and in line with our peers BEE estimated impact on adjusted operating EPS R8c

    115: Appendix 3 Adjusted operating profit by Business Unit in SA Rand

    116: Adjusted Operating Profit – OMSA

    117: Adjusted Operating Profit – Nedcor

    118: Adjusted Operating Profit – Mutual and Federal

    119: Adjusted Operating Profit – US Life

    120: Adjusted Operating Profit – US Asset Management

    121: Adjusted Operating Profit – All Other Businesses *

    122: Old Mutual plc International Financial Reporting Standards (“IFRS”) Analyst and Investor Briefing 3 May 2005

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